What It Took to Own a Home

Economic depression and recovery are central to the plotline of It’s a Wonderful Life. Long before we get to Frank Capra’s portrayal of a bank at the Bailey Building and Loan on a properly rainy day in 1932, we are introduced to Bedford Falls in 1919, as the town is in the grip of the sharp but short-lived recession that came with the end of World War I. This particular economic crisis is the context in which we first witness the conflict between banker Henry F. Potter, “the richest and meanest man in the county,” and the two owners of Bailey Brothers’ Building and Loan, Peter Bailey and his son George (Basinger 116).

As we enter upon that scene, Potter, a member of the Bailey Building and Loan governing board, insists that Peter Bailey foreclose on homeowners who are thirty days past due: “Have you put any pressure on these people of yours to pay these mortgages?” The senior Bailey, looking exhausted, reminds Potter that “times are bad. . . . These people are out of work . . . and have children.” Potter remains implacable, saying, “They’re not my children. . . . Are you running a charity ward?” (Basinger 125–26). Ten years dissolve away, and we are on the doorstep of the next moment of crisis, the unexpected death of Peter Bailey in 1929. But Bailey Building and Loan has survived another decade.

Peter Bailey was his son’s greatest mentor and role model. Shortly before Peter’s untimely death in 1929 (when his son George’s life seems to crash just like the stock market), Peter Bailey provides his son with a brief tutorial on why their family business exists. In answer to his son’ s desire to escape his father’s “shabby little office” and “build things, plan modern cities,” Peter Bailey provides an alternative vision of what it means to be a builder:

I feel that in a small way we are doing something important. Satisfying a fundamental urge. It’s deep in the race for a man to want his own roof and walls and fireplace, and we’re helping him get those things in our shabby little office (Basinger 142–43).

When George reluctantly steps up to assume the leadership of Bailey Building and Loan, his inaugural remarks make clear the social value of pursuing democratic capitalism (as opposed to monopoly capitalism). Speaking directly to Henry Potter, George sums up the lesson of his late father’s life:

You’re right when you say that my father was no business man. . . . But he did help a few people get out of your slums, Mr. Potter. And what’s wrong with that? . . . [ speaking to the rest of the board of directors] You’re all businessmen here. Doesn’t it make them better citizens? Doesn’t it make them the better customers? . . . Do you know how long it takes a working man to save five thousand dollars? Just remember this, Mr. Potter, that this rabble you’re talking about . . . do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath? Anyway, my father didn’t think so. People were human beings to him (Basinger 164).

The world of the early twentieth century was different from the one in which most Americans live today: even if we take into account the convulsive consequences of the Great Recession, the path to owning a home is, for the vast majority of Americans, more direct and smoother than it was a century ago. In that earlier era, there was very little institutional support from within the private economy to help wage earners accumulate the capital required for even a down payment on a home.

And, of course, at that time, the federal government did not provide any assistance to either borrowers or lenders. At that time, if a citizen of the United States did not need a passport or earn enough income to be subject to the federal income tax, they could live their entire life without coming into contact with the much smaller federal government.

Before the New Deal and World War II, making the dream of homeownership come true was the major work of the American building and loan movement. The early records of the building and loan movement provide us with some evidence of how a building and loan association helped wage earners become homeowners. We can first look in the writings of Edmund Wrigley, the founder of the building and loan movement. In his most popular pamphlet, The Working Man’s Way to Wealth: A Practical Treatise on Building Associations (1874), Wrigley announces:

The legitimate object of the Building Association . . . is exclusively to benefit that class of persons who may be designated under the general head of employees, embracing all persons whose wages, salaries or incomes are certain but limited, and who are able to save but little out of the receipts, over and above the expenses of living. . . . Of all known plans, it is the most rapid, sure and effectual one for the industrious man of very small means, or, in fact, no means at all, to accumulate capital (Wrigley 53).

Reading the only account I could find of Wrigley’s life, I found it hard not to think of George and Peter Bailey:

Mr. Wrigley was essentially a self made man, educating himself and always aiming for the best in all things. Like all pioneers he paved the way for those who came after, but himself reaped no material benefits. He died poor in the world’s goods but rich in friends and with untarnished reputation. He was of genial temperament, a happy social disposition and very sympathetic for the troubles of the other fellow, and a great stickler for truth and honesty. Perhaps that is why he died so poor (Rosenthal 238).

Let us now examine more closely the place of building and loan associations in the economy of the 1920s. The American economic system of that time was far more capitalistic than it was democratic. A first mortgage financed by a bank required that the borrower first save a nest egg of between 50 and 60 percent of the purchase price, and then finance the rest through a three- to five-year note.

A building and loan association could help the aspiring homeowner in two ways: by offering a higher interest rate on the account in which the nest egg was accumulating; and, secondly, by offering to finance as much as two-thirds of a first mortgage over twelve years. Even under these terms, homeownership still remained generally restricted to those in the upper middle class and above. Indeed, it was the utilization of building and loan associations by these Americans that most accounted for the associations’ exponential growth in the 1920s (Halbert 15, 24–25, 27–30; Mason 57–58).

Here the popular image of the 1920s as a decade of great prosperity—briefly saluted by Capra in the famous swimming pool scene in It’s a Wonderful Life—leads us a bit astray. In fact, as the economic historian George Soule demonstrated long ago, this private economy, growing though it certainly was, did not have the institutional capacity to support credit arrangements that could stretch far enough into the future to make homeownership available to the vast majority of wage-earning Americans. Indeed, Soule found that “while the poor did not grow poorer, the rich grew richer more rapidly than the poor did” (Soule 317). Thus, even in comparatively prosperous times (and even with the assistance of a building and loan), financing a home remained a daunting challenge.

Under such circumstances, the statement that “the building and loan encourages thrift” was not just an idle boast by the national leaders of the building and loan industry. From that belief sprang yet another: that such a homeowner automatically becomes a “better citizen with higher ideals of social and civic duty” (Sondheim 11–12). And yet exemplary miracles did happen. A vivid example of the transformative power of homeownership achieved through the savings plan of a building and loan association was provided by Dr. Julius Klein, assistant secretary of commerce in the Hoover administration. Speaking to a national radio audience on the centennial of the United States Building and Loan Association in 1931, Klein shared the following “actual case” from his files:

Dr. Julius Klein

Some years ago a man came to the United States from Russia, He was poor. His mood was bitter, savage. He was violently agin’ [against] the Government. He used to mount soap boxes and rant. He ran a Bolshevist newspaper. Then something happened to him. He became interested in a building and loan association, invested his modest savings in shares, and finally bought a home. And then his attitude and manner underwent a really miraculous change. The red gradually faded out of his newspaper. He stopped making incendiary speeches. He demanded law observance and protection. He began to work zealously for his community. He was an American at last (Klein 56).

If the blueprint of capitalism presented by the building and loan industry was elusive yet attainable to white immigrants, there is a practice that is utterly absent from It’s a Wonderful Life: this model of democratic capitalism in the United States was generally reserved for whites only.

W. E. B. Du Bois

Although African Americans faced strong institutional barriers, they nonetheless sought to utilize the building and loan association as a tool of capital accumulation for the working class. In 1899, W. E. B. Du Bois, who was then utilizing the latest statistical and social scientific tools to create the most detailed statistical and analytical portrait of African American life, looked optimistically to building and loan associations to aid in the advance of African Americans within American society. The founding of at least thirteen such institutions was, according to Du Bois, “the most gratifying phenomenon” in the growth of African-American commerce and capital (Du Bois 13). The research and testimony of I. Maximilian Martin Jr. (whose father was active in the building and loan movement serving blacks in Philadelphia), confirms the popularity of these African American “community institutions” run as “part time affairs” from church basements and other locales in Philadelphia, enabling many migrants from the South to buy their first row house (Hardy 1984).

This progress, of course, took place in an atmosphere of hostility from many in the white financial establishment. As Maximilian Martin wrote in 1936, “our people were being insulted all over the city whenever they attempted to get reasonable housing” (Martin 2).

In It’s a Wonderful Life, director Frank Capra uses the character of Henry F. Potter as a symbol of two threats to democracy: monopoly capitalism and a virulent nativism that treats all recent immigrants as cultural threats and economic burdens. As we have seen, the screenplay provides George Bailey with at least one visible opportunity to explicitly refute such thinking. At the same time, this narrative provides no evidence that other kinds of prejudice exists and must be opposed just as forcefully. Except for the brief appearance of Annie, the Bailey family’s longtime domestic worker, the population of Bedford Falls appears to be entirely white.

When we pay tribute to the cultural staying power of It’s a Wonderful Life, if we honor the ability of the many creative minds to create a narrative so faithful to the positive values in the American dream, we must also reckon with their concessions to popular prejudice. Until the civil rights movement began to gain new momentum in the late 1950s and early 1960s, African Americans were portrayed as the objects of light amusement (if not ridicule), entirely absent, or consigned to the deep background of a scene. Like Capra, Roosevelt was completely at home speaking of America’ s most recent immigrants as the quintessential representatives of a new chapter of the American dream. And yet the most gifted politician of his generation also cut and trimmed his public conduct to avoid public mention of anti-black racism. Even as African Americans were emerging as a tangible electoral force outside of the American South, thus eliciting Roosevelt’s carefully worded promise that his administration would allow no “forgotten people, no forgotten races,” he would go no further than these words, lest he divide his political coalition (Kirby).

Franklin Roosevelt acknowledged the importance in the New Deal of both preserving and extending homeownership when he announced that “the broad interests of the nation require that special safeguards should be thrown around home ownership as a guarantee of social and economic stability.” However, the bureaucracy that enacted his words into federal policy rather neatly and deliberately excluded African American communities (Roosevelt, Public Papers 135; Plotkin sections 228, 229, 233, 284, and 289). The patterns of segregation confirmed in the guidelines of the Federal Housing Administration endured long enough to create the neighborhoods that became the targets of unscrupulous lenders peddling subprime adjustable rate mortgages in the Great Recession of our own time (Rugh and Massey).